Webinar: Up-level to profitable growth: Target more valuable customers with telematics

Hear from a panel of insurance experts how telematics can help marketers target their best customers.

• Lisa Jillson, VP of Marketing and Design, Arity
• Tom Williams, Product Director, National General
• Sarah Main, Director of Product, WeatherBug
• Geoff Werner, Managing Member, Werner Advisory

Transcript

Lisa Jillson:
Welcome, everyone, and good afternoon, and welcome to our panel Up-Leveling to Profitable Growth. How many of you listening today work for an insurance company that actually grew last year and how many of your companies had a combined ratio below a hundred? How many of you answered yes to both of those questions? The reality is is that most insurance companies struggle to find ways to grow profitably. In fact, only like two or three of them consistently manage it. Today it’s really a huge challenge for our industry. So in the next 45 minutes, we’ll have an informal chat with a group of experts and they’ll share their perspective on how innovative applications for telematics data can be used to uplevel your growth efforts and increased customer lifetime value and even materially impact your bottom line. My name is Lisa Jillson and I’ll be your moderator today. And while I currently head up marketing and design for Arity, in my former life, I directed marketing innovation and growth initiatives at Allstate, I am lucky to be joined by three fantastic panelists. Tom Williams, product director at National General Insurance, Sarah Main, director of product at WeatherBug, and Geoff Werner, managing member of Werner Advisory. Thanks to all three of you for joining me today. So before we get started, let’s get to know our panelists a little bit better, and I’m going to start by posing a question that I’ll ask each of you to answer. Can each of you give me one example of where you’ve used or seen either telematics or driving data used in an innovative way? Geoff, let’s start with you.

Geoff Werner:
Hi, and thank you. I’ve been fortunate to have been involved with telematics since it was really on the bleeding edge. I’ve never been great with following directions, so I’m going to give a kind of a broad example rather than one specific one. I’ve worked with about 50 companies who’ve implemented programs around the world and what I would say that I’m really proud of with the innovation is when we started this, most of the companies when you talk to them, they thought any block of cheese in the car and self selection effect is going to be good enough, maybe counts the miles and harsh brakes and call it a day. And what I’ve seen in terms of the innovation of this is we’ve progressed way beyond that. So where now we can actually identify and quantify a full range of driving behaviors that absolutely impact risk as well as things about the infrastructure. And I think certainly in the United States we’ve really done a lot with pricing this, but the implications for that kind of knowledge extend well beyond just even the insurance pricing application.

Lisa Jillson:
Great. Sarah, how about you? Oh, on mute a little bit. There we go.

Sarah Main:
I’ve been fortunate enough to be with WeatherBug for the past three years and within the last year [2020], we’ve actually partnered with Arity to bring telematics within our weather application, and that’s been really exciting to understand how driving behaviors and telematics actually works hand in hand with weather and how we combine them to create insights for drivers on the road, provide safety and awareness around their routes and how that all impacts weather and road conditions and whatnot. So I find it really interesting and exciting to understand how you can take two very different industries, partner together and then create a nice feature to work together for your users.

Lisa Jillson:
Fantastic. So Tom, how about you?

Tom Williams:
I guess Geoff said a lot of the traditional stuff that I look at, but from unique use cases, things that we came up quickly, I think first of all would be the Coronavirus coming out. When you see that coming out, you’re like, “Oh my gosh, how is this going to impact our frequencies” and things like that. So we partner with our telematics provider to just look at the impact on miles driven, the number of people taking trips a day, they’d be average distance, things like that. Then another unique use case like that is just could be an impending hurricane or something like that. So you could see, hey, especially in a state like us where we’re in North Carolina and we’re prone to hurricanes, you could just ask a provider, “Hey, what percentage of our people in these certain counties actually showed them moving” and things like that. So aside from the obvious ones, I like the fact that it’s fairly, we can look at unique insights as things come up, external factors I guess.

Lisa Jillson:
Got it. Yeah. Midst of hurricane season, it seems like we’ve got everything falling on us this year between the pandemic changes in behavior and hurricanes and wildfires. It’s certainly been an interesting year. So before we dive in, let’s do a little bit of level setting. Geoff, you’ve obviously been working in telematics for quite a while, both from your work at EMB, at Willis Towers Watson, and even at Octo. Can you give us a bit of definition and share how in your experience, how insurers are using telematics currently? Geoff, we need your audio.

Geoff Werner:
I’m going to talk about this largely from a U.S. perspective because I think this will be a largely U.S.-centric audience here. The primary application of telematics has really been in the pricing front and basically you have companies who have recognized and actuaries have recognized that knowing how much one and where a vehicle is operated is significantly better than the traditional rating and underwriting variables that are largely proxies for that actual driving behavior. They’ve learned that the significance of that is probably about three to four times greater than any of the traditional factors, and there’s a lot of opportunity for pricing above and beyond using the traditional factors in isolation. Putting that in context, probably the 10% of the safest drivers is identified by telematics probably deserve discounts in the 70% range. The ones that are the 10% of the riskiest drivers probably should have their premiums doubled or even more.

The challenge that we have with this right now, however, is that that data is not portable or publicly available at point of sale. So unlike all of the other traditional data items that we use, even something like insurance credit score where you can get it, you don’t have it at point of sale, and that’s where I think the rub has come in on telematics and some of the adoption because it creates uncertainty for the consumer and it creates challenges for the pricing actuary who wants to use it within the rating algorithms. I think later, we’re going to talk a little bit about some of the things that are going on that maybe change that from companies. I think when that happens, we will see that the telematics will become the focal point of rating algorithms, but for right now, what the insurance companies are typically doing is offering a participation discount to entice a consumer to allow them to track the driving behavior and then changing the premium typically downward, sometimes upwards after they have collected the driving data and know what type of driver the person is.

Lisa Jillson:
We’ve been hearing for a while that in insurance that telematics is the next big thing and it feels like – whereas when credit came into the insurance world, it kind of hit with a bang. Telematics has been the next big thing for a long time. Why are insurers continuing to test, and what is blocking, unlocking that?

Geoff Werner:
If you’re asking me, I think first of all, again, I’ll go back to the issue of the data’s not publicly available when the insurance credit score, which is powerful, the insurance credit score data is powerful, continues to be powerful. The telematics data is more powerful than that, so you should really want to use that and you really should push customers to do it, but that insurance credit score data is available. We can go to an Experian or TransUnion or someone someplace like that and get it. In this case, we actually have to entice the customer to allow us to collect that driving, and I think it’s that where we’ve really struggled is getting consumers the messaging necessary to say, this is something that’s good for you, this is something, it’s a fairer way and we’ve seen this in consumer studies that they do believe it’s fairer.

The insurance credit score data is powerful, continues to be powerful. The telematics data is more powerful than that.

I think the consumers overwhelmingly like the fact that it gives them some amount of control and they understand it in a way that, for example, insurance credit score doesn’t quite fare as well in each of those categories. It’s gotten better as the price of having a telematics program has gotten cheaper with things like smartphones. So I think insurance companies are willing to invest a little bit more, take a little bit more risk in it, but I do think that until we solve this problem of being able to tell the consumer at point of sale what exactly the answer is going to look like, we’re going to always continue to struggle to get a mass market adoption.

Lisa Jillson:
Got it. I want to switch gears a little bit, Tom, this next question’s coming to you mentioned at the top of this webinar that there’s this ongoing problem of solving for profitable growth insurance companies can solve for profitability, they can solve for growth, but solving for profitable growth is elusive to many, many insurers. Can you talk a little bit about how insurers like National General are innovating to help face those issues in new ways?

Tom Williams:
Sure, yeah. I’ve always been, I’m sort of old school, but I’ve always thought, hey, if you can’t try to grow and say, hey, we want to grow, and sometimes the more you try to grow, you tend to make risky things and it kind of has the adverse effects. So what we do as a company is we’re really focused on segmentation. We like to, whenever a vendor comes to us with some sort of new product or something like that, we’ll do a retro test and we like to see how much lift does it provide, how it interact with other variables, how acceptable will it be to regulators and things like that. So that’s our thing we like to do is just the more different variables look at it, it provides a segment. Then once you get this good segmentation and same vehicle history when that was coming out seven, eight years ago, it has a lot of lift and if we’re one of the first people to do it, then we’re going to have a lot of benefit.

Plus we will send all the bad vehicles off to other people. So I think that’s sort of how we do that and just have good underwriting income. Then that allows us to have a better rate position. So one of the downfalls that come with that though is just the quote funnel. Every time you add in the old days when I first started, you run an MVR. These days you run credit, alternative credit, MVR, clue and all these other reports. So it just gets really expensive and really drives the acquisition cost ops. So that’s what we just need to really try and manage is getting the right bang for the buck. So I guess that would sort of be it.

Telematics is a challenge for us. Geoff, he’s done a lot of integrations out there. It’s…companies are struggling with how much or how little to invest in it, and you want to invest with the right partner. These mentioned three or four years ago, there are a lot of companies that aren’t there anymore. So you want to make sure you align yourself with the right people, position yourself, and just start…So we sort of delving into it, just getting as many learnings as we can and getting our agents used to it, figuring out the selection bias. But I think most companies are taking a phased approach into it and keep ramping it up. And certainly another channel is…just another thing we’re looking at is the different channels. Another way to grow is keep looking for more distribution channels. We’re probably a 70, 80% agency distribution company, but we do have some affinity groups. So certainly something like using, even finding telematics and things like that gives us another opportunity. I know there’s some companies out there like Ruth that actually use telematics to entice people in. So that’s certainly another opportunity I think that people will be looking at.

Lisa Jillson:
Got it. Let me add a little perspective from my former life leading some P&C marketing programs. Like you said, Tom, sophisticated marketers are always looking for new ways to use data to target and better deliver leads into the sales funnel. But I think what we’re now seeing with new technologies emerging, what defines “better” is changing. “Better” in that before area are things like sophisticated shopping targets or triggers, innovative use of different kinds of demographics or data that you can pull in to either feed the funnel or feed it in different ways…or even the efficiency of the marketing investment that you’re making. But as you have now the opportunity to add data like driving data, like telematics data into that growth funnel, you’ve got now the opportunity to actually figure out what are the best lifetime value, which as a marketer, you hadn’t had that before. You had the opportunity to grow, but getting at that profitable growth, suddenly you’ve got this new opportunity. So Tom, I want to ask you, I know National General is testing with one of Arity’s driving risk audiences in their marketing programs right now. Can you help us understand it’s just the beginning stages, but what do you hope to learn from that?

Tom Williams:
One of the things I said earlier…as you know, we’re a non-standard company. But just by saying we’re non-standard doesn’t mean that we don’t like retention. Honestly, retention benefits us if we can even push out the policy life expectancy an actual month or two, it helps a lot. So originally when we just went in any other, we’re wanting to look at the…Like Geoff said, most people give a participation discount to entice. So we’re wanting to just do that and see the selection bias of people who opt in and opt out. So that was one of the things that we’re doing. Then there’s a lot of it about once you get the actual data, how do you impact the rate? There are certain…I look at different filings from different competitors. Some we know the curve’s very steep from the best or worst driver, but some are giving not even surcharging, some are surcharging a little bit, some are doing it super steep.

So these are certain things that you have to keep into account. I’ve talked to sales folks and they’re like, oh yeah, I was talking to an agent and they mentioned the agent, and I liked the fact that at first renewal the rate was going down like 30%, so they felt it was like a 30% commission cut. So there are so many little factors that we have to look at that makes using telematics…we’re not using it at the point of sale, not a whole lot. Most of it’s …so it just causes more policy holder disruption. So that’s something we have to be sensitive of. Then the other thing I think we want to do is even though they’re not with us a long time, just try and drive improvement with the driver while they’re with us. Certain things like speeding, hard braking, you can, but I think that the one…even when I download our app, it’s the quickest to improve, I think is going to be the distracted driving. Because it’s so easy to measure and when you see it, you’re like, oh my gosh. And we all know it’s bad, right?
Yeah. I mean it’s hard to quantify how it is, but we’re all driving down the interstate and seeing people just driving slow. Then you look over and you’re like, yeah, sure enough if they’re on the phone. So I think that’s something that we just really, really, really want to be able to try and change that behavior in people.

Geoff Werner:
Tom, can I, I’d like that client a question if I could or sympathize with you, Tom. I think one of the things, and you’d ask a little bit of some of the taking time for some of this. I think the hardest challenge, and certainly I know clients that come to me and ask me for some help is, you must get inundated every day with some other startup insurance. You have a whole range of people from Arity who’s been doing and investing heavily in this to two guys in a garage that have some new widget. You must, as an insurance company, get inundated with a request every day and have to try to figure out what is real and what’s aspirational, and sometimes that’s very difficult and certainly telematics is one that’s kind of hard, and I think what I see is companies getting into this and they end up wasting months because they want to go out and try five different widgets and see how it works. And I wonder how do you balance that as an insurance company trying to decide how you have limited resources. How do you decide which one of these things we’re going to go after?

Tom Williams:
That’s a good question. And another thing to your point is I think sometimes it’s better to be the enemy of what…I forget the saying of good is trying to be great. So we try and we don’t overthink things. We like to do things fairly quickly, but at the same point, if someone comes to us, it’s like a job candidate. You want to see their resume, let’s see your model that you use to rate on what other companies do you write with, what states has your model been approved in and stuff like that. So I think that’s the primary thing that we want to look at. But at the same time, if there’s a smaller…for it to be a smaller non established company, they would have to offer some sort of unique value proposition. And there have been some that we meet with that try and put a little different spin on telematics and things. But what we looked at is basically going to be…We want an established player with a good model, and if we want to roll it out in 40, 50 states, we want to make sure that it’s going to be…We don’t want to spend all our time bumping heads with regulators and things like that. We want to make sure it’s something that we can get through pretty quickly.

Lisa Jillson:
Well, I actually want to build on something that Geoff said earlier on with telematics and phrase it from Sarah’s perspective. Geoff, you talked about telematics data not really being available until you got a customer and that’s already your policy holder and now you’re getting telematics data from that. But Sarah, as one of Arity’s significant app partners, we’re trying to turn that on its head. And you’ve got 12 million monthly active users in WeatherBug. You’ve got a really strong user base. I want you to talk about what insurance companies call telematics, but from a user’s perspective, it’s driving data, how that driving data plays into how you’re now engaging with your users.

Sarah Main:
Definitely, definitely. I think in the last year or so we partnered with Arity in bringing telematics within to our weather application, and that’s been really exciting to understand that users can now leverage their weather application to get more insights to their road and their commutes and how the weather’s impacting them day to day. So with telematics, we created a new section around commutes and essentially within our weather application, we now allow users to go in and understand, okay, where are they based? How was the road being impacted around their location due to traffic or weather conditions and whatnot. But then also users have the ability to opt in to different feature sets that we’ve partnered with Arity to create for them to really understand what they’re deriving behaviors are about. So now not only do they see their driving behaviors day to day on the road, but they can also see, okay, what routes have they taken? What’s the average commute time? And then we can forecast out how that will be changing based on traffic patterns and weather patterns, but then also then tying that into telematics and understanding more analytics on the road, but bringing that into a consumer application. So we really wanted to create a diverse feature set in our weather app, but leveraging what Arity can bring to the table.

Lisa Jillson:
And I am going to have a follow-up question for you on this. It feels like, and I know our partnership is still relatively new that we’re just scratching the surface. You’ve been a really successful founder and partner and director of product in the mobile app space. Where do you see this going? Where do you see the use of driving data in that mobile app world, maybe outside of insurance?

Sarah Main:
Definitely the one thing I can see for sure is also with the weather application, we’ve now created this feature differentiation to bring users in and hopefully they can stay longer and spend more time in the app for drivers to come in and say, okay, normally are they looking at the forecast, but how is the weather and how is my driving data going to impact my future and how my routes will change day to day? So really giving users more data about how their day is going to change all around connecting it to the weather. So I think that there’s so many different avenues that we can grow because weather will obviously be impacting their routes and their driving patterns every single day, whether they’re going to be doing a short commute or a long road trip. So I think we can really leverage each other’s technology by growing the feature set and really bringing more information to bringing them more alerts or more push notifications or really telling them, okay, we know that something’s going to change the next 24 hours. Maybe you need to wake up a little earlier so you can forecast out that your route’s going to be different. So I think we can start predicting on how things are going to change and giving users more visibility to how their routes will be impacted, not only from driving data, but also from the weather data, but bringing them in a feature that they would be unexpected to arrive in the first place and kind of giving them insights they didn’t know they wanted in the first place.

Lisa Jillson:
That to me is really exciting because then it really gives the end user a chance to be able to use driving data in a different way. It’s not just driving data that might give me dollars off on my insurance policy, but it’s actually having it kind of changes the angle and having it be really useful to them in a day-to-day setting, which is fantastic. Tom, along those same lines, from a future standpoint, as we talk about being able to use telematics data further up that funnel, even in the acquisition phase, whether it’s through targeting or offers, how do you envision using that telematics data to actually deliver specific offers to specific prospects? Not policy holders, but prospects?

Tom Williams:
Yeah. Well, I mean I think that’s a holy grail. I mentioned earlier a lot of our challenges could be you have to give the participation discount then when they’re actual driving behavior actually changes. You have to change their rates and things like this. So I think that having something like this here, you could just give ’em the rates, say it is what it is. So I think that’s sort of where we need to be in the future. A lot of it’s just scale. How do we get this information? Obviously we’re not a biggest company and we can’t just go connect with every little company out there that has an SDK embedded. So it seems to me just got to have sort of a repository where all this information is, and I think we could go and go after the better drivers, or part of it is we’re a non-standard company, so give us your better drivers.

We probably go after the better drivers that are still traditional non-standard, right? Because we’re not going to just go roll out and just say, “Here it is.” This is our rating [inaudible], we’re not rating. I saw someone said they’re not going to use credit as of 2025 or something, but why don’t…We’re still going to do a lot of this, so hey, give us your traditional non-standard maybe even if you have someone with no proof of prior, a few accidents, things like that. So give us the better drivers that have those sort of attributes. So we’d probably just look for our niches within that, and I’m sure other companies are bidding on their different things. So then I think a lot of it’s just simplifying enrollment. I think Geoff might have mentioned earlier, I know I’ve met with a few OEMs (original equipment manufacturers) and if you want to get data from one, you have to go through this conduit, and then they have to do this app and all that. So if someone could take, we don’t have the resources to do that with every company. So if someone could take care of a lot of the blocking and tackling and things like that, then I think that’s sort where it eventually needs to end up.

Lisa Jillson:
Or even to go back to the idea of what going to where the users already are 10 plus 12 plus million users already using an app, that location is a part of that. It makes a ton of sense.

Tom Williams:
And the other thing…

Lisa Jillson:
Geoff – oh, go ahead.

Tom Williams:
One other thing I mentioned with that is just struggling is, let’s get the offer in front of ’em and when we know they want the offer, that’s the other thing I’m thinking. How do we figure out when they’re…maybe if it’s a no prior insurance guy, first of all, how do we know that they don’t have prior insurance? So a lot of it’s going to be pending external data to their data, and the other one is let’s get the offer to ’em when they want, because it’s kind of the chicken or the egg with preferred people, long tenure, everyone wants a long tenure, but to get the person, you have to make ’em switch. So it’s like how do you get the person who doesn’t switch to switch? So it’s just about getting offer to ’em in the right time. So that’s something else that we just want to figure out how to do that.

Lisa Jillson:
Yep, agree. Hey, Geoff, I want to come back to you though, because again, you’ve got the longest tenure in history, everyone on this panel in using telematics in different ways, where do you see the opportunities for the industry to better leverage that use of telematics data across the entire customer journey from prospect all the way through to longtime renewal?

Geoff Werner:
Yeah, I mean, I clearly support everything that you guys are saying about moving the data to before point of sale. I think that will be a tremendous benefit. And I think clearly there are companies like Arity and actually my old OCO with the drivability program with Marketplace that are trying to do just that, and I think that’s critical. I think from a pricing aspect, as I said earlier, I think once we do that we’ll really be able to unlock the power of the data for the pricing part of this and really integrate it with traditional factors in a way that’s not being done. But for me personally, I think there are a few other things that I think need to happen. One of those is happening in other parts of the world and that’s in the claims application, claims, insurance losses and the expenses to settle those losses represent the vast majority of each premium dollar.

So anything that we can do with this telematics data to either reduce the amount of the claim or to even get it settled more quickly, we’ll have a twofold effect. First of all, and I don’t know about you guys, but I’ve had a couple of accidents and I am with USAA who’s really good at settling claims, and it’s still not a very fun process to go through. And you can imagine with telematics data, I shouldn’t have to talk to two or three people to try to figure out where I was when my car got into an accident. Frankly, if the accident was severe enough, they should probably already know that it happened. They should be able to triage my claim so that I get routed to the right person at the beginning. They should be able to tell me where they can tow my vehicle to if it’s that much damage.

There’s so many things that could be done in the claims application and they are being done to different degrees in other places, like Italy’s been pretty big in that. So I think that’s one area and I’m starting to see interest in that by insurance companies in the United States. So I’m really excited about that. The other side of it is really just in customer engagement altogether. The most obvious example is the one that I’m passionate about, which is behavior change. We’ve seen telematics used in the commercial lines in fleets to improve driving behavior. We’ve seen companies tried in personal lines, which is a little bit more difficult to do with what I’ll call mixed success. I think that that is something that there’s so much societal benefit for us if we can reduce facts before it ever happens, that I think that’s an area you’re going to see.

But I think it goes broader than that even on customer engagement. I think, again, like USAA that…I worked there for 13 years and they were so good at looking at the entire customer and figuring out when there were across all opportunities, and just by seeing what you did on one policy, they could figure out you might have another need. Well, telematics data could give people the opportunity to do that too. If you start to see things in their driving patterns that might indicate that there’s some other change that we need to make or something that you could offer to your customer and it could just change the whole dynamic from an insurance company being a necessary evil that I have to buy this required auto policy to something where, okay, you know what? My insurance company actually cares about me. And you think about the stuff that you’re doing with WeatherBug, and you can imagine it might be nice to get your insurance company saying, Hey, we noticed you do these things and you know what? Maybe here’s a safer option for you. And you get a level of caring that I don’t think insurance companies get. I think insurance companies do care, but I don’t think they get the benefit of that always with the consumer. So those are just some of the things that I think you’re going to see telematics data used for in the coming years.

Lisa Jillson:
Yeah, I definitely see, see there being a huge opportunity with all the innovation like WeatherBug has done on bringing weather data and now driving data together to help educate, prepare their users for what they’re going to face. And you start to think about where that is just unlocked at a place that users are already going to for information. So it makes a ton of sense for them to have that or at least leverage that. It is innovative. It is definitely not how an insurance company would think about it, which is I need to engage in my app. There’s lots of opportunities to engage in other people’s apps, and you bring that expertise in.

Geoff Werner:
You think about…I mean, I live in Texas now. I grew up in the northeast, and so I did have experience driving in inclement weather, but I travel for my job and I’ve been in Wisconsin when it was a blizzard, right? I wouldn’t have minded my insurance company saying, Hey, we know you’re from Texas and you don’t have a lot of experience in this kind of, and you’ve got a snowstorm coming. Maybe you should think about these couple of things if you’re going to be out driving that rental car in the next hour or so. So I think there are just things that it will fundamentally improve the engagement between the insurance company and their customer and get us away from the distrust or the insurance company is an evil necessity to that’s somebody that actually understands me and cares about me.

Lisa Jillson:
Yep. Well, let me wrap things up here today on this panel. We’ve definitely heard from some great experts in telematics, some great experts in engaging consumers in their daily commutes in ways that have shaped not only the insurance industry, but the mobile app industry at large. We talked about how this driving data can be applied across the customer journey and how we can unlock new things when we try to look for ways to take this kind of driving data and unlock value in the prospect stage all the way through to the claims experience and the renewal stage, and even started to explore what some future applications of telematics data can be to help influence drivers. I want to thank all three of you for spending the time today. I learned a lot. I hope that our audience gets as much out of it as I think we did and interacting today, and I want to thank all of our listeners for listening in. I hope you have a wonderful day.